Dear All,
I have a client who exports small gifts to the USA, UK and Europe. She is based in the UK and sells her products through the internet.The product is posted from the UK and stored in the UK. She is creeping near the vat threshold limit and she is of the opinion that her sales to outside Europe are not to be included in the calculation for vat threshold. I have spoken briefly to HMCE and they say the USA sales should be included, but taken as zero rated sales. My client does not agree with this. I have looked over the internet and found it very confusing. Has anyone come across this problem ?
Thanks
Andrew
Replies (7)
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I would never rely on HMRC
as sole source of what is correct. It seems like the US sales are outside the scope of UK VAT, so there is no reason they should be included in your calculation for the threshold.
Exports of goods are Zero Rated
Exports (goods sold & delivered to outside Europe) are zero rated for VAT so I can't see any reason why they wouldn't be included in the taxable turnover calculations.
It's one of those occasions ...
... where you have to accept that HMRC are correct.
The question therefore is - what percentage of goods sold are zero-rated? If sales are predominantly Z/R then HMRC may grant exception from registration.
Had a similar case with a similar business a couple of weeks ago. Sales mostly to UK, some to the rest of the EU and beyond. Her figures on total turnover showed she had reached the threshold last November. When I separated out the non-EU sales the position was the same but excluding the EU sales it looks as if she will not reach the threshold for a couple of months yet.
Like you, I found the online advice not 100% clear, although http://www.hmrc.gov.uk/vat/start/register/when-to-register.htm gives the following advice -
If you supply goods and services both inside and outside the UK, then you may need to register for UK VAT if the value of your UK supplies alone exceeds the registration threshold.
You don't need to include supplies you make in other countries when calculating your VAT taxable turnover for registration purposes - so leave out of your calculation any goods and services you supply where the place of supply is another country rather than the UK.
I rang the VAT helpline and, after checking with a supervisor, was to that was the correct position. UK sales only count towards the threshold.
Correct, nutwood, but ...
... not the full story.
Yes you leave out sales where the place of supply is outside the UK but since most exports and dispatches will be treated as made in the UK that doesn't exactly help the OP, who seems to be supplying mainly (if not only) goods.
I see why there is confusion
HMRC's manual says that exports and dispatches to EU should be excluded. Problem is that I can't find the legislative authority for that. Exports are zero-rated and dispatches will be either zero- or standard-rated. Since Z/R supplies are still taxable then, by definition, they must be UK supplies and, I would have thought, included. At this point I concede that my knowledge is exhausted, so over to one of the site's experts.
In the meantime - given that it is in black and white in HMRC's manuals I'd be inclined to rely on the advice. Even if it is proved to be wrong, you/your client can hardly be blamed for following it.